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Tests of Rational Expectations and No Risk Premium in Forward Exchange Markats

David A. Hsieh

NBER Working Paper No. 843
Issued in 1982
NBER Program(s):International Trade and Investment Program, International Finance and Macroeconomics Program

This paper tests the hypothesis that traders have rational expeatations and charge no risk premium in the forward exchange market. It uses a statistical procedure which is consistent under a large class of heteroscedasticity, and a set of data which takes into account the institutional features of the forward exchange market. The results show that inferences using this procedure are very different from those using the standard assumption of homoscedasticity.

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Document Object Identifier (DOI): 10.3386/w0843

Published: Hournal of Interlational Economics, Vol. 12, no.1/2 (1984): 173-184.

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